The die is cast in Macau casinos

The die is cast in Macau casinos
The House Of Dancing Water is the in-house entertainment centerpiece for the City Of Dreams casino in Macau.

MACAU - On the third floor of the City of Dreams casino in Macau, private VIP saloons for high rollers are named after iconic rivers in China such as the Huangpu in Shanghai.

Aptly so, since flowing water, in fengshui tradition, is believed to represent the flow of money.

But on a Monday afternoon, there is a discernible drought. Of the 12 luxuriously appointed rooms, nine are empty. In the remaining three, fewer than half the gaming tables are taken up, with a handful of players murmuring "gen" (the Mandarin term for "call").

The subdued scene at the Melco Crown Entertainment outfit is an indication that Macau's gaming industry is likely to see its worst- performing year in a decade since the industry was liberalised. There are now 35 casinos under six operators in the city.

Gaming revenues in the fourth quarter are headed for what analysts believe will be a 20 per cent plunge year on year, with estimates that the entire 2014 will see a fall or at most minimal growth from last year's US$45 billion (S$59 billion).

Casting a further pall is Chinese President Xi Jinping's visit here as part of the 15th-anniversary celebrations of Macau's handover from Portugal to China.

Recent weeks have seen Chinese officials issue warnings about the need for Macau to diversify its economy beyond the gaming industry, which is now providing for more than two-thirds of the local government's revenues.

It is hardly down in the dumps - it is still streets ahead of Las Vegas and Singapore, making seven times their respective chips last year.

But 2014 has been - as Bloomberg Intelligence analyst Tim Craighead puts it - a year of "death by a thousand cuts" for the People's Republic of Casinos, which has boomed from being the only place in China where gambling is legal.

These "cuts" range from the tightening of transit visa conditions for mainland Chinese, who can no longer go through Hong Kong, to a junket embezzlement scandal in May.

There are also tough year-on-year comparisons, given that last year saw dizzying heights of growth for the industry.

But the deepest cut of all has been the anti-corruption campaign waged by Mr Xi.

While tigers and flies alike are being nabbed, with the fattest cat skinned to date being former Chinese security czar Zhou Yongkang, the effects are spreading to the playground of rich Chinese.

Tellingly, the VIP segment has borne the brunt, seeing its takings decline by 19.6 per cent in the third quarter, notes Mr Craighead. This is even as the mass segment held up, growing 15.1 per cent, though that is also a slowdown from earlier.

Interviews with industry players indicate that the impact, which started to be significantly felt around the middle of this year, has been twofold.

First is the psychological effect of such a prominent campaign.

"People are afraid of being spotted and want to stay low-profile, so they have reduced the number of their trips," says a top executive at a casino operator who spoke on condition of anonymity.

While the spotlight of the anti- corruption campaign has been on officials, they do not form the bulk of visitors as they need official approval to enter Macau. "The only way they can come is by using fake passports," says the executive.

What has been more damaging is the impact on businessmen - those working for state-owned enterprises or the private sector - who cut deals with the government. So the stream of VIP customers from industries such as real estate, mining and construction has essentially dried up, says the executive, citing as an example those from a group of firms from Sichuan province - Zhou's former power base.

Gaming analyst Ben Lee of IGamiX estimates that VIP gamblers who used to visit Macau six times a year now halve the frequency - "to reduce visibility".

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